Santa Clara: The Hottest Data Center Market?

Data center demand remains strong, and no market is any hotter than Santa Clara, California. The city, long known as a data center hub for Silicon Valley, will soon be home to new data centers for Facebook and Yahoo. Several major data center developers have expansions planned for Santa Clara later this year, including Dupont Fabros (DFT) and Terremark (TMRK).

"I think (Santa Clara) is one of the best markets in the country, and I wish we had product available sooner," said Hossein Fateh, President and CEO of DuPont Fabros, who said demand has accelerated because the city has cheaper power (about 7 cents per kilowatt hour) than many other areas of Silicon Valley. "Historically, from an Internet standpoint, that's been the best market in the country. If you're after a 3 megawatt or 5 megawatt (data center) deal, it doesn't make sense to go to the Pacific Northwest because you have to take whole team."

Manuel Medina, the CEO of Terremark Worldwide, says his company already has strong demand for its planned expansion in Santa Clara. "We expect to break ground on the project on the second half of this fiscal year, and we expect to have an executed (customer) contract before breaking ground. A lot of the demand is coming from existing customers in our current facility, which is immediately adjacent to the land where the project will be located."

Here's a recap of the data center transactions in Santa Clara over the past year:

May 28:Yahoo (YHOO) signs a lease agreement with Digital Realty Trust, Inc. (DLR) for a Turn-Key Datacenter, and intends the new facility to qualify for LEED Gold certification as a "green" data center.

Feb. 15: Facebook says it will lease an entire data center building in Santa Clara from Digital Realty Trust (DLR), positioning the company for significant additional growth. In May Facebook reveals that it has also borrowed $100 million to buy servers.

Dec. 14: Quality Technology Services purchased a 120,000 square foot data center it had been leasing since it bought Globix in 2006.

Dec. 13: DuPont Fabros Technology (DFT) paid $22 million to buy 17.2 acres of land in Santa Clara, where it will build two 300,000 square foot data centers.

June 14, 2007: Equinix (EQIX) says it will invest $41 million to expand its existing data center in Santa Clara, Calif. by approximately 1,100 new cabinets. Equinix said it hopes to open the expansion space in the second quarter of 2008.

May 9, 2007: Behringer Harvard pays $70 million to acquire the Santa Clara Tech Center, a three-building complex with two office buildings and a facility that will be converted into a data center.